Does not add much value. Build for cash flow not added value. At most the cost of building it. Not as much as the main house. Maybe $200/SF. Limited pool of people who want ADUs … too much hassle for most
In San Francisco an ADU would automatically put the whole property into the multi-family category and thus subject to rent control. Not sure about Dublin but if there ever is a state-wide rent control bill passed they will likely make a distinction between SFH and MFH. I won’t touch ADU with a ten foot pole.
Sorry for the late reply. Thanks a lot for your reply @Elt1, manch and @caiguycaiguy. I was told by few that it adds same value as main house. If that is not the case, its not worth building it.
I have single family house in Dublin CA, with large backyard. So my goal was to build ADU for extra income as initial research showed some positive cash flow against investment and its separate structure, so its easy to rent out to others. The cost of building ADU, as I research more is really high due to huge fees like impact fees ranging from $25K to $50K (not known until City verifies all details) plus various other fees like Sewer approval, and various inspection, on top of actual construction cost. It seems the cost could go as much high as $400+/sq.ft. due to very high City fees.
An ADU is not even as as valuable as a duplex in your neighborhood. It is a niche product that has limited appeal. Sfdragonboy was a big promoter but even he didn’t have one…I had one in Emerald Hills and buyers gave it no value…But it only cost me $75000,$150/sf, and generated $30k yearly income for 10 years…Unfortunately only one buyer saw the value…Used for his maid…
There is a potential of 150,000 ADUs in the BA…But SF has only approved 68 units in the last two years…It has become a joke…
If you have an older style 2-story house it often doesn’t come with a master suite onground level. In that case I think it’s worthwhile to build one, fully attached and integrated to the main house though.
Ground level master suites are popular with multi-generational households. You’ll add lots of value to your house.
Ground floor master suite is popular here on newer homes. It replaces the family room on the first floor which still has a living room. Then there’s a family room upstairs for the kids. That way the family and living room are on separate floors.
My wife is listing a house with a sauna and sitting area in the garage. Great for her Russian clients. I doubt anyone else will value it. ADUs have a similar lack of interest.
Planners promoting them as a cure for the housing crisis are clueless.
Thanks. Got it. So only if it brings more cash year on year then only its worth but seems it doesn’t add as much value to home. I was hoping to have year on year rental income + ability to increase house value to get more loan out on that to re-invest outside and recover the investment on ADU. Thought it will be win-win situation but based on what you are suggesting… it won’t be that much worth with huge cost of it due to hefty fees i.e. cost coming to $300 to $350/sq.ft. depending upon fees and gotchas City department comes up.
Other than looking from the financial angle, the biggest hurdle for ADUs in my view is whether the owner is ready to be a landlord and whether he/she is capable of and willing to handle the landlord/tenant relationship. In California’s pro-tenant environment, the moment you get a tenant onto your property, you start to lose some control over your property. The extra income you get every month is nice, but one needs to be aware what you are giving up in exchange. If you can maintain a good relationship with the tenant, then everything is nice and easy even with repairs you need to do. But if you and tenant are at odds, and you cannot get rid of the tenant in the next 30 or 60 days, can you imagine living in that situation where this person you have an issue with lives right downstairs or in the room next to you or walks into your backyard freely any time of the day? I wouldn’t want anyone outside my family to be this close to me, let alone some stranger holding a grudge. Are you willing to make that kind of sacrifice in case you land a bad tenant?
Now that rent control is coming to the entire state you have to take that into consideration. The original bill was going to sunset after 3 years but nothing sunsets after 3 years, if at all. Once it becomes law, it’ll only get more strict over time. The problem with rent control (at least in the way it’ll be implemented) is it has to come with just cause eviction, and what that means is if you don’t have a just cause, you have to let the tenant stay FOREVER. Does that thought sound scary to anyone, especially if that tenant lives on the same property as your family?
When I refinanced my house the bank gave no value to the income generated. They valued the ADU at $75k… that was it. At a 5cap it was worth $600k. They thought it was not even worth $300k at a 10 cap. Banks and buyers don’t care. They will not value it like income property. It is just inferior extra SF like a bonus room or basement. Not premium SF equivalent to the average SF of the main house. The reason why is that most people don’t want an ADU and tenant hassles. I found that when I sold. Even though my ADU was basically a pool house, buyers gave if no value except the purchaser who wanted it to house their maid.
I do wonder if that’ll change as people live longer and multi-generetional living becomes more common. Apparently that’s either not enough people to create a market for it, or they just have family live in a regular bedroom not a separate suite.
If this bill passes, and it looks likely to pass, then it appears that:
a) The ADU is subject to statewide Just Cause Eviction laws if the owner does NOT occupy the main house.
b) The whole thing is (both the main house and the ADU) is subject to statewide rent control (section (3)(d)(5) — I do not believe that the main house and the ADU have “alienable separate titles.”)
This is exactly what I was afraid of when investigating ADUs over the last two years. I was thinking of building an ADU, and the city promotes and champions ADUs heavily as killing two birds with one stone — good for landlords and good for tenants (increased housing supply).
However, what no one bothered to mention was that the state is contemplating Just Cause Eviction Laws + Statewide Rent Control to be legislated on top of houses+ADUs. So the worst case scenario is that you want to sell your house+ADU, but you have a tenant in the ADU and it becomes more expensive to get them out to sell your house — particularly if you are renting out the main house and the ADU at that time.
This is why I abandoned the idea of an ADU. Now it looks like my fears are coming to fruition.
Precisely! Well said! The city of SF seems to think that the reason why not more ADUs are getting approved is because there is too much red-tape with the building-department, inspections, etc.
People are not that dumb. The concept of an ADU is: “Here, take your SFH and expose yourself to huge tenant Rent Control + Just Cause Eviction headaches, make your house much much harder to sell, and increase the value of your house by ZERO DOLLARS, all for the benefit of a little bit of cashflow every month. Oh by the way, the cost for the privilege of doing so is $500/sq ft.”